Is it worth caring about super when I am under 35?

Even when you are 35, I imagine retirement seems a long time away. But when you are 25, retirement is so far away it seems like forever. I’ve talked to lots of guys and girls under 25 about super and their attitude is usually some variation of ‘retirement is so far away, I have other things to think about first’. When you consider goals like buying and paying off a house, travelling or keeping up with general living expenses, it is not surprising that super is at the bottom of most people’s priorities.

Here are a few reasons why you should care about super.

It is your savings that you will live on eventually

Your employer is required to contribute

Employers are required to put 9% of your salary into super. From 1 July 2013 employers will be required to put 9.25% of your salary into super. Eventually, this will rise to 12% of your salary.

As the ATO say, “Super is your money (but not yet)” – so you should have an idea of how much is in your super account.

You may be able to save tax (either now or in the future)

Superannuation has always had tax concessions to encourage people to save for their retirement.

By voluntarily contributing to super, you are moving money into a lower tax environment (for most people).

Little bits make a big difference

The power of compounding means small amounts now can grow to big amounts later. This sounds logical, but if you consider that starting saving a year later could cost you 20% over 30 years (see my article To start saving 1 year later will cost 20% over 30 years), you get a massive advantage by starting early.

You might not be able to rely on the government

We have an ageing population so we might have larger problems in 40 years

Australia (like many other countries around the world) has an ageing population. By 2050 (or slightly less than 40 years away), the majority of Australians will be retired.

The government needs workers to help the economy run and grow. The government also needs people to pay taxes to fund the spending budget. If you consider the pressure on areas like our health system now, consider it with 3 x the number of elderly people.

The Age Pension might no longer be available

Currently, if you don’t have enough superannuation, you can receive an age pension from the government (if you pass the income and assets test). Although the age pension doesn’t pay much, at least it provides something to live on. The government announced compulsory superannuation in the 1990′s when it realised that it would have problems funding age pensions for all Australians in 2050 based on our ageing population.